MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

MAHINDRA & MAHINDRA LIMITED 32 2c. CIE Automotive India Limited (formerly known as Mahindra CIE Automotive Limited) (“CIE”) Maximum Amount in any Financial Year Higher of (A) and (B) Monetary values p.a. Rs. in crores (A) % of Consolidated Turnover as per the last audited financial statements of the Company for the relevant financial year (B) a) Purchase of goods primarily including castings, forgings, sheet metal, and other components/parts; Sale of any goods and material including passenger / commercial vehicles, electric vehicles and other related components/parts; 2,850 2.85% b) Sharing or usage of each other’s resources like employees, infrastructure including IT assets, cloud, IOT and digital engineering, digital transformation, analytics, cyber security, receipt of royalty / brand usage, manpower, management and management support services, owned / third party services, professional services, technical support and reimbursements; 50 0.05% c) Purchase / sale / transfer / exchange / lease of business assets including property, plant and equipment, Intangible assets, transfer of technology to meet the business objectives and requirements; 50 0.05% d) Any transfer of resources, services or obligations to meet its objectives/ requirements. 50 0.05% The proposed transactions as mentioned in point 2a to 2c above, would be purely operational / integral part of the operations of the Company and in ordinary course of business with terms and conditions that are generally prevalent in the industry segments that the Company operates. 3. Any advance paid or received for the contract or arrangement, if any Based on the nature of transaction, advance for part or full amount of the transaction / arrangement could be paid / received in the ordinary course of business. 4. Tenure Existing (as on 1 st April, 2022) and new Contracts / arrangements / agreements / transactions for remaining period of 4 years i.e. upto 31 st March, 2027. 5. Justification for why the proposed transaction is in the interest of the Company 5a. Swaraj Engines Limited ("SEL"): S EL is an India-based company, which is primarily engaged in the business of diesel engines, diesel engine components and spare parts. It manufactures diesel engines for fitment into Swaraj tractors, which are manufactured by the Company. SEL is into manufacturing and supplying of diesel engines in the range of 20 HP to above 65 HP. It is equipped with highly productive & precise quality analysing machines. It is also manufacturing hi-tech engine components. Common Vendors for Tractor and Engine Parts, provide operating synergies to the Company. In the Financial Year 2022-23, the Company sold 4,07,545 tractors (under the Mahindra, Swaraj and Trakstar brands, a growth of 14.9% over the previous year). This is the highest ever vehicle sales and tractor sales in any year by Mahindra’s Farm Equipment Sector. Your Company's F23 market share at 41.2% continues to position it as the domestic market leader for the 40 th consecutive year. Your Company's performance was supported by good performance of all products in the portfolio across all three brands viz. Mahindra, Swaraj and Trakstar. The Company has built adequate manufacturing capacity for the immediate future and is in the process of investing in additional capacity as part of its mid to long-term strategy for its Farm Equipment Sector. As it prepares to open its new manufacturing facility in Mohali, Swaraj Tractors produced its two millionth tractor. A further 17.41% of SEL was acquired by your Company from Kirloskar Industries Limited (KIL). As a result, the Company now own 52.13% of Swaraj Engines Limited (SEL), making SEL a subsidiary of the Company. Thus, keeping in view the expected future business prospects of the Company, it is proposed to seek approval of the Members for Related Party Transactions entered/ to be entered into with SEL as per the limits stated in point 1. 5b. Classic Legends Private Limited ("CLPL"): CLPL is mainly engaged in sales & marketing of two wheelers, spares, accessories & related activities. CLPL aims to revive classic motorcycle brands and has launched motorcycles such as Jawa, Yezdi and BSA. Your Company being a promoter of CLPL, was approached by CLPL to manufacture and supply motorcycles to CLPL under its brand name. In line with the strategy for the two-wheeler business, the Company through CLPL had reintroduced the iconic brand 'Jawa' to the Indian market in the Financial Year 2019, with the launch of new range of JAWA motorcycles - Jawa and Jawa FortyTwo. In FY22 another iconic brand 'Yezdi' has been reintroduced with three new models at the same time – Yezdi Adventure, Yezdi Scrambler and Yezdi Roadster. The Company will be benefited by using its manufacturing facility at Pithampur plant and R&D facility for two wheelers of CLPL. CLPL will be able to utilise the expertise of the Company for manufacturing, sourcing, etc. During FY23, 42 Bobber motorcycle was introduced in Indian market and in addition CLPL forayed into UK and European market by introducing iconic British brand BSA. This in turn will contribute towards Mahindra Group synergy. Transactions with CLPL are expected to grow in future with strong collection of Brands such as Jawa, Yezdi and BSA. Keeping in mind the potential quantum of transactions with CLPL over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with CLPL as per the limits stated in point 1. 5c. CIE Automotive India Limited (formerly known as Mahindra CIE Automotive Limited) ("CIE") CIE, part of the global auto component player, is a diversified multi-technology company and a player with complex & value-added parts. Its global customer base includes major Original Equipment Manufacturers (“OEMs”) of India and overseas. It being a leading producer of forgings, castings, magnetics, stampings with wider range of product technologies, well established and certified plants provide assurance of the quality and timeliness of production and supplies. Also, several years of established relationship between the Company and CIE has resulted in operational synergies and cost optimisation besides assurance of product quality. CIE being an auto component maker, targets to have all key OEMs in its customer portfolio. The Company is one of the leading OEMs in India and has been a major customer for CIE. Other transactions with CIE are also linked to or are relevant for ensuring smooth supply of products to the Company. Transactions with CIE are expected to grow in future. Keeping in mind the potential quantum of transactions with CIE over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with CIE as per the limits stated in point 1. Besides the specific company-wise justification stated above in point 5a to 5c, the Company benefits through operational synergies, cost optimisation, assurance of product/service quality, utilising the expertise within the group for manufacturing, sourcing, etc. thereby bringing efficiencies in the businesses, providing enhanced level of user experience to the consumers of the Company to enable achieve growth objectives, access to and utilisation of strong R&D and design capabilities. Financial assistance would drive growth in subsidiary's/ associate's business and will enable them to innovate, scale up and pursue growth opportunities in a more focused manner.